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TMI Blog2015 (8) TMI 1410X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Company Judge, nor he has accepted an offer made by respondents to make a joint effort for a willing buyer on mutually acceptable price. We also agree with the submission of learned counsel appearing for the respondents that the application of the kind, filed by the appellant, was not maintainable under Rule 9 of the Rules of 1959. The inherent powers of the Company Courts do not extend the power to pass order, which may recall and frustrate the Scheme of Amalgamation, on any subsequent developments after the Resultant Company has been incorporated putting the clock back. No good ground to interfere. If the appellant wants to seek any relief, he may, if so advised, apply under Section 397/398 of the Act of 1956, subject to his competence, for appropriate orders. - D.B. Special Appeal (Civil) No.9/2015, S.B. Company Application No.45/2012 And S.B. Company Petition No.23/2005 - - - Dated:- 7-8-2015 - HON'BLE THE CHIEF JUSTICE MR. SUNIL AMBWANI HON'BLE MR. JUSTICE AJIT SINGH Mr. Anant Kasliwal with Mr. Vaibhav Kasliwal, for the appellants. Mr. Soli Cooper, Senior Counsel assisted by Mr. Nitin Jain Mr. Rohan Batra, for the respondent JUDGEMENT- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resenting the issued capital of the company by adopting such route as may be permissible in law (underlining mine) and make such compliances as may be required in law including that of offering a specified percentage of the shares to the public, for subscribing thereto, through the book building process, in the manner provided for under SEBI (DIP) Guidelines 2000 and upon such steps being taken, BSE may issue such orders (underlining mine) that may be required in law and as may be necessary for securing the said listing. The shareholders in the event of STLL not being listed were directed to not be at the mercy of the promoters and were held to continue to have an exit option . 5. It is submitted that learned Company Judge had erred in law in dismissing the application on the ground that no direction for listing of the shares of the Company with reference to Clause 3.7 of the sanctioned scheme, dated 08.05.2006 under Section 391 of the Companies Act, 1956 (in short, 'the Act of 1956') can be given, with a time frame. Learned Company Judge has erred in relying on the judgment of the Madras High Court in Pentamedia Graphics Limited, ment and Softowers rep. by Dr. V Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006, provide option given to the shareholders to pay only to the Stock Exchanges, and that with an intentional delay and neglect in taking steps in getting the Company listed with SEBI, and further with no exit option, Clause 3.7 has been frustrated, by which the entire Scheme requires re-look by the Court and the Resultant Company be wound up. 8. Learned counsel appearing for the respondents submitted that they had taken all steps permissible in law to get the Resultant Company listed on the Stock Exchanges. They have explained, in detail, the steps taken by them, on which the Resultant Company could not be listed in SEBI upto now despite their best efforts. 9. By an order dated 03.07.2015, the respondents were required to file an affidavit, giving the steps taken by them, for listing of the shares of the Company. In compliance, an affidavit has been filed by the respondents, explaining as to why and under what circumstances, the respondents have not succeeded so far in getting the shares of the resultant Company listed on the Stock Exchanges. Paragraph 6 and paragraph 13 onwards of the affidavit reads as follows:- 6. With this understanding in mind, the answering Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nanimously concluded that the matter would necessitate further monitoring and deliberation and consideration by the Board of Directors. (f) It is significant to mention that at the relevant time, the following routes were available by which a company could get listed: (i) Listing of equity shares pursuant to a scheme sanctioned by a High Court: In terms of the SEBI Circular SEBI/CFD/SCRR/01/2009/03/09 dated September 3, 2009 issued under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, ( ICDR Regulations ), a company could apply to SEBI for relaxation from Rule 19(2) (b) of the Securities Contracts (Regulations) Rules, 1957 ( SCRR ) and list its shares without making an initial public offer if it satisfies the conditions prescribed under Rule 19 (7) and the aforesaid circular; (ii) Initial public offer ( IPO ) in terms of Regulation 26(1) of ICDR Regulations: In terms of Regulation 26(1) of the ICDR Regulations, a company could make an initial public offer, if it, inter alia, fulfills the condition of having a track record of having distributable profits in terms of section 205 of the Companies Act, 1956, for at least 3 out of the immediately precedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention that pursuant to the resolutions passed in the BoD meeting dated 16.12.2009, the answering Respondent initiated the process for selection of Merchant Bankers through the tender process and carried a detailed exercise for evaluating suitability of various intermediaries that had responded to the request for participation in the selection process undertaken by the special working group. (j) On 3.02.2010, a Board meeting was also convened, wherein the BoD reviewed the report prepared on the results of tender process for the selection of the Merchant Banker and other process in the matter of listing of the shares of the answering Respondent. Thereafter, the Board accorded its approval to conclude the process of appointing the First Merchant Banker at the earliest; and settling its scope of work and areas of its activity. (k) In pursuance thereof, the IPO and listing committee of the directors of answering Respondent in its meeting held on 10.03.2010 reviewed and approved the Report on Tender Process Results for the selection of the First Merchant Bankers and recommended the same for the approval of the Board of Directors. (l) Thereafter, on 11.03.2010 the BoD on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was the award of spectrum for such circles that gave a new lease of life to the company and the answering Respondent began provisioning telecom services under the UAS license in such areas. Copy of the Letter of Intent dated 30 April 2013 is enclosed herewith as Annexure-A. 18 From being a Pan India operator to providing services in merely 9 circles, the entire operations of the answering Respondent underwent drastic re-structuring and remodeling. 19. Amidst such adversities, the financial health of the answering Respondent continued to suffer as it remained a loss making concern from 2008 with accumulated losses amounting to ₹ 11080 crores as on 31.03.2013. The intrinsic value of the equity shares of the answering Respondent had also been rapidly diminishing and the loss per share as per the audited balance sheet for the year ending 31.03.2013 stood at ₹ 9.02. Details of the accumulated losses and loss per share for the years 2008-09 to 2012-13 is tabulated hereinbelow. Particulars 2008-09 2009-10 2010-11 2011-12 2012-13 Loss per share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 2015, held as follows: The issue which therefore requires consideration in the case at hand is as to whether Clause 3.7 of the sanctioned scheme dated 08.05.2006 was a mandatory part of the scheme- a part of its basic structure essential to its object purpose and purpose and its satisfactorily workability. In my considered view for an answer to this question one need to go further than the order dated 07.08.2008 passed by this Court with regard to the sanctioned scheme in issue. Therein the Court itself clearly visualized the possibility of non-listing of the shares of the respondent company in the near future for reasons of listing being in the domain of statutory authorities. And therefore in the alternative provided that the minority shareholders in such an eventuality when desirous be allowed an exit option by the company if its shares were not listed . Aside of the above, listing of the respondent company s shares on the Stock exchange/s within a specified time cannot be to my mind held to the raison d ^etre of the sanctioned scheme dated 8.5.2006. And it has not been even so argued 25. In ruling that listing of shares is not a mandatory part of the scheme, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, it has still not completely recuperated financially. The answering Respondent continues to reel under heavy losses and debt as it experiences year on year losses. The net worth of the answering Respondent for the last three fiscals has also been consistently eroding. It is significant to mention that the answering Respondent s accumulated losses at the end of fiscals 2014 and 2013 were more than fifty per cent of its net worth, making it a company with negative net worth. 30. At the ground level, the answering Respondent is also facing fierce competition from its adversaries. While its rivals have already shifted or are on the verge of shifting to next generation 4G/LTE technology, the answering Respondent is still grappling to capture its original market share in the existing 2G/3G network. 31. At this juncture, it is worth mentioning that in the current statutory and regulatory regime, the eligibility to make an IPO in India is prescribed at two levels as set out below: a. Eligibility under the relevant Securities and Exchange Board of India Regulations ( SEBI Regulations ) SEBI, as a matter of practice and in order to protect the interests of the investors, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and also provide a certificate to the NSE stating that the net worth of the company has not been wiped out by the accumulated losses resulting in a negative net worth. 32. In the present case, the answering Respondent neither meets the eligibility norms (i) to (iii) of SEBI nor the pre-conditions for listing before NSE since the answering Respondent has been incurring losses in the preceding five years and also because it has a negative net worth. Accordingly, even if the answering Respondent undertakes an initial public offer, it will not be able to list its shares on the NSE. 33. The answering Respondent may be eligible to list its shares only on the BSE Limited. However, as stated above, the answering Respondent has to mandatorily allocate of 75% of the total offer size to QIBs. Because of the answering Respondent s negative net worth, it is highly unlikely to attract investment from QIBs, which are sophisticated investors and this would also inevitably result in a failure of the offer. 34. I say that such circumstances do not in any manner inspire making a public offer of shares and are in fact, factors which advise against listing of a concern. Hastening the answeri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rease its profitability. 39. The answering Respondent will continue to constantly monitor the feasibility/commercial possibility of making a public offer and would revisit the question, as and when the market conditions, macro economic outlook and the answering Respondent s own business prospects warrant it to go public. This decision will be taken under and will be subject to the expert advice of the merchant bankers and industry experts and in consultation with all stakeholders of the answering Respondent. This will be in the interest of all shareholders of the company including the Appellants. This position of the answering Respondent had found acceptance of the Ld. Single Judge, which recorded the said averment in the Impugned Order dated 09 January 2015. 40. The present affidavit is being filed without prejudice to all the contentions and statements made by the answering Respondent in its reply to the Stay Application to the present appeal and in its reply to Company Application No. 45 of 2012. The said affidavit has been filed for the limited purpose of bringing on record, for the satisfaction of this Hon'ble Court, its compliance of direction no.1 of the said Order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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